At all levels of the Labour party, optimism was in generous supply before the Christmas break. During their rounds of parties up and down Whitehall, cabinet ministers have raised their glasses to renewed hope, while being careful not to get carried away.

Rather than dreading the next opinion poll, party activists have been asking when the next one is coming, eager to see the Tory lead drop again. "It has all made a pleasant change," said one Labour MP. Last week there was even some good news on unemployment. The message: Labour is back in the game and enjoying a bounce. Until today, that is.

The latest Ipsos MORI survey for the Observer will do much to puncture the morale of a party that had dragged itself back from an autumn of unremitting despair to a point where it hoped to enter 2010 believing it was in with a chance. Before the Labour conference in September, Alistair Darling said the party seemed to have "lost the will to live". But, from somewhere, it had found it again.

Ironically it was last month's Ipsos MORI survey that had changed the mood in Labour's favour. That poll shook the political kaleidoscope, putting the Tory lead, which had been around 20 points just six months before, at just 6%. Suddenly Labour MPs believed a hung parliament could be on the cards.

Labour's recovery could be explained, very largely, by a surge in economic optimism as the recession seemed to be drawing to a close. Then 46% of people believed the economy would get better over the coming 12 months.

In a political environment sensitive to mood, Ipsos MORI's findings were followed by several others that also showed the gap narrowing. The Conservative lead was around eight, nine, 10 points. Labour hoped people were crediting Gordon Brown with having steered the country through difficult times, and that voters were recoiling from David Cameron's call for austerity measures to put the public finances back in order.

The Tories seemed a little rattled and rushed out a string of policy announcements on issues such as the battle against red tape. If things got even better, would Brown call a snap election?

Suddenly the mood has swung again, and that prospect looks highly unlikely once more. The trend of recent weeks has been dramatically reversed by today's figures. There was a foretaste of such a change in a lone ComRes poll last weekend that also showed a 17% Tory lead, but another by YouGov was with the prevailing trend, showing it at 9%.

Again the key determinant of changes appears to be the economy. Today's poll was taken after the implications of Darling's pre-budget report 11 days ago had fully sunk into the public consciousness. Darling may have deferred the pain of tax rises, such as an additional 0.5% rise in national insurance from April 2011, but it was a chilly reminder of grim times ahead. The chancellor not only shocked voters but was also attacked by business groups, as well as the Tories, for failing to do more to tackle the deficit. He got it in the neck from both sides – for doing too much and doing too little. While his one-off tax on bankers' bonuses was popular, it was, in every other sense, a political nightmare to deliver.

The consequence, reflected in today's poll, is that economic optimism has collapsed since the PBR as fast as it was built in the run-up to it. Having digested Darling's messages about the soaring deficit and national debt, and the implications of that for their own finances, just 32% of voters now believe the economy will improve over the next 12 months.

Many MPs believe the volatility in the polls is evidence that voters are no longer loyal to any one party. When the economic news appears good, voters are less inclined to think ill of the government of the day, but when things look rough they take against it.

Labour believes that, despite the PBR, it can still recover reasonably swiftly to a position where it is just 10 or so points behind the Tories in the new year, a gap narrow enough to give it hope going into an election campaign.